Sky-high cost facing airlines

The global airline industry will need to invest $5 trillion in new planes in the next 20 years, says Boeing.

Boeing has been making 20-year forecasts since the 1950s and in its latest prediction said airlines would need 30,900 new aircraft through to 2029 - valued at US$3.6 trillion ($5 trillion).

Airlines in New Zealand, Australia and South Pacific Islands would need 920 planes worth US$120 billion.

Boeing commercial airplanes vice-president of marketing Randy Tinseth said the world economy had improved.

"As a result of what we've seen in the market place we've made a series of decisions over the last year to increase our production rates in later years," Tinseth said.

A little over a year ago, the world economy turned a corner between recession and recovery, he said.

"In fact now we see what we call an expansion of the world economy happening."

In general this year was one of economic growth and passenger recovery, next year airlines would return to strong profitability and 2012 would see increased demand for new aircraft, he said.

"That's why we've been increasing our production rates."

Financial markets were very important to the health of the industry and were getting better, he said.

"In 2009 there was a question in the industry, 'Would we be able to finance all the airplanes that we were going to deliver?"'

The industry last year delivered about US$64-65 billion worth of aircraft and the good news was the market was there to finance the planes, Tinseth said.

More fuel-efficient single-aisle planes were forecast to account for 68 per cent of the 920 aircraft needed in the Oceania region with 28 per cent from twin-aisle models such as Boeing's 787 Dreamliner.

Boeing last month said a delay in engine availability could push the first 787 delivery back from a few weeks into 2011 to the middle of the first quarter.

The original delivery date had been 2008 for the hi-tech aircraft, which was expected to use 20 per cent less fuel than other planes of its size.

Boeing launched the 787 in 2004 when the average price of oil was US$38 a barrel, while today it was closer to US$70 or US$75 a barrel, Tinseth said.

"So the value proposition we promised to our customers then is even stronger today," he said.

"I think that's a big reason why they've been sticking by us through these difficult and challenging times."

The New Zealand aviation market was being transformed by intense competition, innovation, development of more efficient aircraft and the growth of low-cost airlines, Tinseth said.

"In 2000 there were no low-cost airlines among the top 10 airlines providing seats in the New Zealand market," he said. "By 2010, low-cost airlines were providing 24 per cent of all seats."

The New Zealand market had the advantage of being supported by a vibrant and growing travel and tourism market, Tinseth said.

Long-term air traffic growth in the Asia-Pacific region was projected to be 7.1 per cent a year during the next 20 years.

"Today about one-third of all airline traffic touches the Asia-Pacific region, and as a result of the growth in this market by 2029 almost 43 per cent of all traffic will be to, from or within the region."

In the 1950s Boeing looked at three markets - US domestic, US international and the rest of the free world, Tinseth said.

"The rest of the free world has come a long way in 50 years."

BOEING FORECAST
* 30,900 new aircraft needed globally in next twenty years.
* 920 new aircraft needed in New Zealand, Australia and South Pacific Islands.
* 5.3pc a year world average air travel growth.
* 7.1pc a year air travel growth in Asia Pacific.
* 3.2pc annual growth in global gross domestic product.